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Research and development key to promoting digital economy
UNESCO recorded that the gross expenditure on R&D (GERD) of Indonesia was as miniscule as 0.08 percent of GDP in 2013.
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UNESCO recorded that the gross expenditure on R&D (GERD) of Indonesia was as miniscule as 0.08 percent of GDP in 2013. (Shutterstock/File)
T
he current government priority on developing infrastructure to distribute the cake of economic growth has generally been accepted with an outpouring of praise. But there is a policy to that of stood in stark contrast from the previous era. We have witnessed a stronger commitment to adapt to the global movement, which requires states, including Indonesia, to shift toward a digital economy.
President Joko “Jokowi” Widodo has highlighted this issue on many occasions. In a bilateral meeting with Singaporean leader Lee Hsien Loong recently, a discussion on common interests related to trade and investment also tilted to the digital economy as an imperative agenda between the two neighbors. Jokowi also appointed the founder of Alibaba Group, Jack Ma, an adviser for an e-commerce steering committee.
If we follow the script used by the government on accentuating the digital economy, we will see the cherry on top revolves around the role of e-commerce and an internet-based economy supported by the development of informa- tion and communication technology (ICT) infrastructure. This is also a core message spread by Jokowi when envisioning Indonesia as ASEAN’s biggest digital economy in the near future.
Alas, some key aspects of the digital economy’s development might have been overlooked. To have a better interpretation on what actually constitutes the term, a more well-refined definition should be adopted.
The Organization for Economic Cooperation and Development (OECD), for instance, describes the digital economy as a phenomenon driven by the expanding role of ICT. Thanks to ICT, businesses can transform their supply-anddemand chains. ICT also supports the birth of new firms and increases productivity and economic growth.
In their study in 2008, Bart van Ark, Mary O’Mahoney and Marcel P. Timmer assessed why and how the productivity rate in the United States surpassed Europe by the mid-1990s after decades of being left behind. They found the slowdown in the European economy was attributable to lower growth in ICT investment and a relatively small share of technology-producing industries.
The OECD and the European Union have gone through a decade or two before us in pursuing the digital economy. They itemized that the ICT comprised two main subgroups: Manufacturing (electronics and components, computers and communication equipment and consumer electronics) and services (telecommunications, computer and related services, including the internet). Thus, by definition, the internet-based industry is certainly a pillar in the digital economy but not the only one.
